MSB & MONEY TRANSMITTERS LAW.
A Legal Foundation For Your Crypto Business.
Cryptocurrencies have been on the rise the past several years and are an increasing trend in the US and over the world. However, the regulations and laws surrounding transmitting and exchanging them are just catching up. Although the U.S. government does not consider cryptocurrency a legal tender in the United States, there are still money transmission and money service business laws that impact almost all digital currency businesses. A Money Transmitter License is not a new concept; however, recent legal developments have applied the money transmitter requirements to businesses dealing in cryptocurrencies.
Do You Need A Money Transmitter License?
We guide our clients through the entire analysis to determine whether they need to register and get licensed as a crypto money transmitter. Generally speaking, a money transmitter is an individual or company that transfers funds or provides any type of payment services. According to U.S. law and FinCEN, you need to register as a money transmitter if you meet any of the following:
Any business that conducts more than $1,000 in business with one person in one or more transactions in the same day in one or more of the following services. Under U.S. law digital currencies exchanged for fiat currencies fall firmly within these guidelines, and businesses offering these services are considered money transmitters. Keep in mind, each state that you may be operating in will also require you to register and get licensed as a money transmitter. It’s critical that crypto money businesses register with both the U.S. Government and the appropriate state.
Money orders
Traveler’s checks
Check cashing
Currency dealing or exchange
Money transfer services in any amount (including crypto currencies)
Helpful Examples:.
If you exchange Bitcoin for goods and services, you probably do not need a money transmitter license.
If you accept Bitcoin from one person and send it to another as a business, you likely do need a money transmitter license.
If your business exchanges fiat currency for bitcoins, or bitcoins for another type of digital currency for customers, you do need a money transmitter license.
If you operate a business as a payment processor that accepts bitcoins from a merchant’s customers, but pay that merchant in fiat currency or operate as an crypto atm, you do need a money transmitter license.
Potential Penalties & Applicable Laws:
Civil penalty. Any person who fails to comply with the registration requirements may be liable for a civil penalty of up to $5,000 for each violation. Failure to comply includes the filing of false or materially incomplete information. Each day a violation continues constitutes a separate violation. In addition, the Secretary of the Treasury may bring a civil action to enjoin the violation.
Criminal penalty. It is unlawful to do business without complying with the registration requirements. A criminal fine and/or imprisonment for up to 5 years may be imposed.
See: 31 CFR 1022.380(e) (formerly 31 CFR 103.41(e)), 18 USC 1960. Registration must be renewed every two years. Re-registration is required in limited circumstances.
RECENT COURT UPDATE:
At least 4 people were arrested and charged with financial crimes related to the “illegal” transmission of Bitcoin. An FBI article about a case involving an Ohio man explains what they found and the sentence they handed down:
“Court records show Mercede wired funds to make daily purchases of $10,000 and $40,000 in bitcoin. Over six months beginning in August 2014, Mercede illegally converted or transmitted $1.4 million. He was sentenced on March 21 to more than six years in prison. The case represents one of the first convictions for what is believed to be an increasingly frequent crime—operating an unlicensed money transmitting business.”
SERVICES
Federal Registration as MSB
Federal Registration as Money Transmitter
State By State Registration as Money Transmitter or MSB
Reporting of qualified transactions to Federal government / FINCEN
**The deadline for initial registration is the end of the 180-day period beginning on the day following the date the business is established. See: 31 CFR 1022.380(b)(3) (formerly 103.41(b)(3)).
**Bitcoin ATM and other crypto providers are also required to get licensed/registered: For more information visit:
https://news.bitcoin.com/government-cracks-down-on-illegal-bitcoin-money-transmitters/
https://www.fincen.gov/money-services-business-msb-registration
